Correlation Between Vanguard Extended and Fidelity Extended

Can any of the company-specific risk be diversified away by investing in both Vanguard Extended and Fidelity Extended at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Vanguard Extended and Fidelity Extended into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Extended Market and Fidelity Extended Market, you can compare the effects of market volatilities on Vanguard Extended and Fidelity Extended and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Vanguard Extended with a short position of Fidelity Extended. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Extended and Fidelity Extended.

Diversification Opportunities for Vanguard Extended and Fidelity Extended

1.0

Correlation Coefficient

Vanguard Extended  Fidelity Extended

No risk reduction

The 3 months correlation between Vanguard and Fidelity is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Extended Market and Fidelity Extended Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Extended Market and Vanguard Extended is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Vanguard Extended Market are associated (or correlated) with Fidelity Extended. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Extended Market has no effect on the direction of Vanguard Extended i.e., Vanguard Extended and Fidelity Extended go up and down completely randomly.

Pair Corralation between Vanguard Extended and Fidelity Extended

Assuming the 90 days horizon Vanguard Extended is expected to generate 1.0 times less return on investment than Fidelity Extended. In addition to that, Vanguard Extended Market is as risky as Fidelity Extended. It trades about 0.25 of its total potential returns per unit of risk. Fidelity Extended Market is currently generating about 0.25 per unit of volatility. If you would invest  8,340  in Fidelity Extended Market on September 3, 2024 and sell it today you would earn a total of  1,482  from holding Fidelity Extended Market or generate 17.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Vanguard Extended Market  vs.  Fidelity Extended Market

Vanguard Extended Market

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Extended Market are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Vanguard Extended showed solid returns over the last few months and may actually be approaching a breakup point.

Fidelity Extended Market

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Extended Market are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fidelity Extended showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Extended and Fidelity Extended

The main advantage of trading using opposite Vanguard Extended and Fidelity Extended positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Extended position performs unexpectedly, Fidelity Extended can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Fidelity Extended will offset losses from the drop in Fidelity Extended's long position.

The idea behind Vanguard Extended Market and Fidelity Extended Market pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.